A new survey reveals that the world’s chief executives view the risk of a recession as their biggest external concern in 2020.
They also feel unsettled by trade uncertainty, political instability, economic slowdown, and more intense competition from disruptive technologies.
However, they plan to counter such forces by developing more innovative cultures and new business models.
Conducted annually since 1999 by the Conference Board, this year’s survey gauged nearly 750 CEOs and nearly 800 other C-Suite executives from mainly four regions: Europe, Latin America, Asia, and the United States. As part of the survey, participants weighed in on which external and internal issues warrant the most immediate attention in 2020.
External Concerns in 2020
Recession fears top the list:
- Global: For the 2nd year in a row, CEOs and other C-Suite executives globally rank a recession as their top external worry in the year ahead.
- US: For US CEOs, a recession rose from being their 3rd biggest concern in 2019 to their top one in 2020. The issue surpassed cybersecurity, their top concern in 2019.
- Elsewhere: A recession also tops the list of concerns of Chinese and European CEOs, and ranks as the runner-up for Latin American and Japanese CEOs.
Widespread concern over trade uncertainty:
- Global: CEOs globally rank uncertainty about global trade as their 2nd biggest external worry in 2020.
- US: It ranks as the 4th biggest worry of US CEOs, tied with its affiliate issue: global political instability.
- China: Chinese CEOs rank trade uncertainty as their top worry, tied with their fear of a recession.
- Latin America and Europe: CEOs there rank it 1st and 3rd, respectively.
Chinese CEOs feeling the effects of economic sanctions
- China: Chinese CEOs rank the effects of economic sanctions as their 5th biggest external worry, tied with the issue of more demanding customers. Their concern about sanctions is the highest ranking by any country by a big margin.
- What it reveals about US-China trade tensions: The role technology plays in this conflict is deep and enduring. Tariffs are likely to be temporary and easily subject to negotiation, but technology blockades, via economic sanctions, are not.
- Global: For CEOs globally, fiercer competition rose from being their 4th top external worry in 2019 to their 3rd in 2020.
- US: For two years in a row, US CEOs cite the issue as their 2nd top external worry.
- China: For Chinese CEOs, concerns about fiercer competition rose from being their 7th in 2019 to their 3rd in 2020.
- Japan: The issue also rose in importance for Japanese CEOs, going from their 4th in 2019 to their 3rd in 2020.
Cybersecurity budgets increase, but strategy remains elusive
- Bigger budgets: More than 70% of responding CEOs globally plan to increase their cyber security budgets in 2020.
- But unclear strategy: Almost 40% of responding CEOs globally say their organizations lack a clear strategy to deal with the financial and reputational impact of a cyber attack or data breach.
Climate change heats up
- Global: For 2020, CEOs globally ranked the impact of climate change on their business as 9th, up from 11th in 2019.
- Driving the momentum: CEOs in Latin America (4th, up from 10th in 2019) and Europe (8th, up from 13th in 2019).
“The ongoing concerns about recession risk among business leaders reflect the slowing economy of the past year and the uncertainties about the outcome of the trade disputes and other policy concerns,” said Bart van Ark, Chief Economist at The Conference Board.
“However, given a slightly better outlook for the global economy and an easing of trade tensions, we anticipate that a drumbeat of negative sentiment – which can become a self-fulling prophecy – can be avoided, and that we will see more confidence about business prospects in 2020.”
Last month, most senior finance executives at U.S. businesses believe the U.S. will be in an economic recession by the end of 2020, and 76% predict a recession by mid-2021, according to fourth-quarter results from the Duke University/CFO Global Business Outlook.
But, even with a recession on the horizon, the U.S. firm CFOs lead the world in terms of optimism about the general business environment, Bloomberg said.
At the company level, firms are taking steps to mitigate the effects of a recession by increasing their cash holdings.
“Hoarding cash and reducing debt are the most obvious tactics to dull the blow of a recession,” said Campbell Harvey, professor at Duke University’s Fuqua School of Business.
Globally, U.S. based firms have the highest degree of optimism about their own company. Capital spending is expected to rise 4.7% and wages are anticipated to grow 4.4%, the largest increases since the first-quarter survey.
Economic uncertainty remains a major concern among CFOs around the world.
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